Last update on 2024-06-27

Hermes (HMI.F) - Dividend Analysis (Final Score: 5/8)

Analysis of Hermes' (HMI.F) dividend stability, performance, and growth against an 8-criteria system, scoring 5/8.

Short Analysis - Dividend Score: 5

We're running Hermes (HMI.F) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend Yield

Hermes' current dividend yield stands at 0.6743%, which is significantly lower than the industry average of 2.5%. This trend indicates that Hermes' dividend yield has underperformed compared to the industry over the past 20 years. The highest yield was observed in 2009 at 1.11%, while the lowest was 0.29% in 2021. Despite slight increases in the yield over certain years, the company's consistent focus on luxury goods and robust stock price performance have led to relatively lower dividend yields. The stock price has appreciated from around €50 in 2003 to nearly €1930 in 2023, indicating a strong capital gains potential versus dividend returns. Hence, it's crucial for investors to acknowledge that while Hermes offers modest dividends, the greater return has historically been from capital appreciation rather than regular income.

Average annual Growth Rate higher than 5% in the last 20 years?

Explain the criterion for Hermes (HMI.F) and why it is important to consider

Dividend Growth Rate measures the annualized percentage rate of growth of a company's dividend payments. A sustainable and increasing dividend growth rate is an indicator of the company's strong financial health. Moreover, an average growth rate higher than 5% over a significant time frame, such as 20 years, can signal consistent earnings growth, effective management, and strong competitive positioning.

Average annual Payout Ratio lower than 65% in the last 20 years?

Average Payout Ratio lower than 65% in the last 20 years refers to the fraction of net income a firm pays to its shareholders in dividends, averaged over two decades. It is important as it denotes the company’s ability to sustain dividend payments without compromising growth or stability.

The five-year average payout ratio for Hermes (HMI.F) is 28.87%, significantly lower than 65%. Historical data shows a range of 0% to approximately 36% from 2003-2009, 25.64% to 33.17% from 2010-2014, and oscillating values between 31.03% and 34.31% from 2015-2019, except for higher numbers occasionally like 70.23% in 2015 and 91.97% in 2013. In 2020-2021, this metric drops from 24.84% to 19.47%. For 2022-2023, a slight increment ranges from 24.84% to 31.56%. This indicates prudent earnings retention, capable of financing potential growth, a positive sign for investors.

Dividends Well Covered by Earnings?

This criterion examines whether the company's earnings adequately support its dividend payments. It helps assess the sustainability of dividends.

Analyzing the historical data for Hermes (HMI.F), we observe the Earnings Per Share (EPS) and Dividend Per Share (DPS) from 2003 to 2023. Between 2003 and 2007, Hermes did not pay dividends. After initiating dividends in 2008, a significant part of earnings covered them from 2008 to 2023. Despite fluctuations, the ratio of dividends to earnings remains generally below 1, peaking at ~0.92 in 2012, indicating good coverage. However, the cover ratio dips notably under 0.2 in some years like 2021, suggesting potential strain. Overall, the trend is positive as Hermes maintains a healthy balance between payouts and earnings, despite occasional dips, implying sound financial management.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow (Hermes)

Consider Hermes' free cash flow and its dividend payout amount for years 2003 to 2023. Hermes' coverage ratio fluctuates from a low of 0.1439 in 2021 to a high of 1.4606 in 2012. Generally, a ratio above 1 indicates that the dividend is well covered by free cash flow, whereas a lower ratio suggests potential strain. In Hermes' case, the ratios mostly fall below 1, highlighting potential stress in covering dividends directly from free cash flow, except in the year 2012. This trend suggests that while Hermes has healthy cash flows, it often distributes large dividends that might be at risk during leaner cash flow years, which can be a concern for sustainable dividend policy.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the last two decades, is of utmost importance for income-seeking investors.

Analyzing the dividend payments data for Hermes (HMI.F) over the past 20 years, we observe several fluctuations. The dividend per share started inconsequentially low in the early 2000s, becoming significant only in 2008. From 2008 onwards, dividends per share show volatility with several years experiencing substantial increases and subsequent decreases. Significant drops are noted in 2012, 2014, 2016, and 2019. Each of these drops was less than a 20% decline from the previous dividend. Notably, however, the overall trend since 2008 has shown considerable recuperation and growth, culminating in a peak of EUR 13 per share in 2023. Impressively, the recent years show signs of stabilizing progress. Despite past fluctuations, the absence of a 20% drop in any given year is a positive sign of recovery resilience and growing financial stability. In conclusion, Hermes has shown strong recovery post-decline, ensuring income investors' trust in its stable payouts.

Dividends Paid for Over 25 Years?

Criterion 6 evaluates if Hermes (HMI.F) has paid consistent dividends for over 25 years. This metric indicates financial stability and reliability.

The data provided shows that Hermes (HMI.F) has paid dividends since 2008. This means that Hermes does not meet the criterion of paying dividends for over 25 years. However, it's noteworthy that the dividends have generally increased over time, despite some fluctuations. For instance, in 2008, they paid 1 per share, increasing to 13 per share in 2023. This trend is good as it reflects the company's growth and financial health, despite not spanning the required 25-year period.

Reliable Stock Repurchases Over the Past 20 Years?

criterion for Hermes (HMI.F) and why it is important to consider

To determine the reliability of stock repurchases over the past 20 years for Hermes, we need to examine the share count data. Looking at the trend from 2003 to 2023, we notice that the number of shares has generally decreased, albeit at a slow pace. Hermes repurchased shares in years such as 2004, 2005, 2006, 2007, 2008, 2011, 2012, 2014, 2018, 2019, and 2022. With an overall average repurchase rate of -0.2784, the trend seems modest but positive. This suggests that Hermes is somewhat reliable in its stock repurchase strategy; a decreasing number of shares often indicates that a company is buying back its stock. By reducing the number of shares outstanding, Hermes can potentially increase earnings per share (EPS) and return value to its shareholders. However, the sporadic nature of these repurchases may raise questions about the company's long-term commitment to this strategy. Generally, consistent buybacks are viewed more favorably in financial analyses as they indicate corporations are committed to providing shareholder value. So, while the trend is modestly good, it lacks the consistency often desired by investors.